Tales from the Mailbox is a blog by Health Cost Matters. In these articles we relate stories of common billing mistakes, and what steps you can take to resolve them and prevent overpaying.

In today’s article, our first, we outline why overpayments are so common.

Here’s the Deal

The billing, coding and reimbursement system in the US is based upon a maze of complex codes, numbers, terminology and rules. The end result is that patients pay out of pocket more than they should, and this happens more often than you can imagine.

Most healthcare providers’ intentions are pure, their trade is to provide health care services because of a passion for helping, healing and caring. Most insurance companies want to do the right thing by their enrollees, their reputation is their most precious asset.

Regardless of intent, the coding and billing side of the healthcare business is where most of the costly errors occur. Why?

1. Coding complexity. Assigning codes to diagnoses and medical procedures is astronomically complex, extraordinarily detailed and the room for error is infinite. In short, it’s surprising to us whenever any claim of any complexity is billed correctly.

In October 2015, ICD-10 diagnosis and procedure codes replaced ICD-9 codes. ICD-9 Procedure codes were comprised of 4 numeric digits and included 3,000 distinct codes; ICD-10 procedure codes are 7 alphanumeric digits and include 87,000 distinct procedures. At the same time the number of diagnosis codes increased from 13,000 (ICD-9) to 68,000 (ICD-10).

Payment of claims is based upon coding, and the upside of the change is to allow greater flexibility, detail and precision in coding. The downside is the sheer volume of codes that are now available, the complexity of those codes, and the endless opportunity for error. As just one infamous example of the extraordinary flexibility, ICD-10 diagnosis code V97.33XD is “Sucked into jet engine, subsequent encounter”. What could possibly go wrong?

2. Untrained staff. Sometimes business office staff who are responsible for billing have limited experience or are inadequately trained. They may not understand or follow billing and coding rules and frequent turnover can be a problem.

Courses are available to train staff on general coding rules in which the goal is ensuring the provider is properly reimbursed, not overpaid and not underpaid. But even when a claim is coded correctly, it may be billed inappropriately. For example, not all states always allow providers to ‘balance bill’ a patient the difference between what the insurer paid and what the out-of-network provider billed for hospital-based services. Yet this happens all the time, and most patients are unaware of this rule and simply pay the claim.

3. Automation errors. Insurance companies largely rely on automated processes to pay most claims, a human is often not involved. If a claim is billed wrong it will be paid wrong. When humans are involved in the process, they make mistakes too, lots of them.

Overpayments, underpayments and inappropriate denials of service occur when the payer’s systems are configured incorrectly. Multiple systems are often involved to pay a single claim,and beneath the surface are ever-changing contractual agreements with providers, payment rules, coding and state and federal mandates that the insurer must adhere to. Delays and errors in system configuration occur constantly. When a system is configured incorrectly, 100% of claims involved are paid wrong.

4. Fraud, Waste and Abuse. Sadly and unfortunately … fraud, waste and abuse happens. Fraudulent billing is conceived to ‘enhance revenue’, and is designed to escape without notice or scrutiny. A fraudulent provider might ‘balance bill’ a single patient for thousands of dollars, or might balance bill thousands of patients for only $68.00.

Waste and abuse occur when a patient receives a test, a procedure, a prescription that is unnecessary, or a service that lacks evidence of producing a better outcome, or a costly procedure that have less expensive alternatives. And then there are the costs associated with avoidable medical ‘misadventures’.

Common Yet Clear-as-Mud Insurance Terminology

As if billing and coding issues weren’t complicated enough, there is also terminology (e.g., EOB, COB, balance billing, maximum allowable, unbundling ...) that can be confounding if you’re not a health insurance professional. See our Resource Section for hyperlinks to glossaries of healthcare terminology. Also, we are building our own glossary and as we add blogs, we will be adding definitions to our Glossary of Healthcare Terminology and Jargon.

You Are Not Alone.

Overwhelmed by healthcare costs and confusing claims? Is it easier just to pay the darn bill than try to decode it and fight the system? Spiraling out-of-control healthcare costs affect us all … and billing errors occur more often than you can imagine, based on the structural and systemic issues we’ve looked at today.

Send your personal ‘tale from your mailbox’. And watch this space as we address readers’ concerns and questions.